BRASILIA, June 21 Brazil’s annual inflation rate slowed more than expected in mid-June and fell below 9 percent for the first time in a year, renewing hopes of interest rate cuts amid a harsh recession.
Consumer prices, as measured by the IPCA-15 index, rose 8.98 percent in the 12 months through mid-June, down from 9.62 percent in mid-May, statistics agency IBGE said on Tuesday.
Prices rose 0.40 percent from mid-May to mid-June, below the median forecast of 0.52 percent in a Reuters poll and easing from 0.86 in the previous month. Food inflation slowed sharply from May and transportation prices fell, mostly due to a 6-percent drop in the cost of ethanol fuel. Higher water and sewage utility rates spurred a rise in housing costs.
Following the release of the inflation data, yields on interest rate futures fell as traders perceived a greater prospect of interest rate cuts by the central bank in coming months.
The official inflation target is Brazil is 4.5 percent, a goal last achieved in August 2010. The central bank has kept its benchmark interest rate at its highest in nearly 10 years, at 14.25 percent, in a bid to slow the 2016 inflation rate at least to the top end of its tolerance range, at 6.5 percent.
Low investment rates, hefty government spending and a surge in subsidized credit have fueled price increases in Latin America’s largest economy, even as it went through its worst recession in generations.
Mid-May Mid-June
– Food and beverages 1.03 0.35
– Housing 0.99 1.13
– Household articles 0.55 0.57
– Apparel 0.72 0.42
– Transport -0.30 -0.69
– Health and personal care 2.54 1.03
– Personal expenses 0.81 0.89
– Education 0.29 0.06
– Communication 1.26 0.01
– IPCA-15 0.86 0.40